Bankwell Financial Group (NASDAQ:BWFG) Will Pay A Larger Dividend Than Last Year At US$0.20

Bankwell Financial Group, Inc. (NASDAQ:BWFG) will increase its dividend on the 24th of February to US$0.20. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

See our latest analysis for Bankwell Financial Group

Bankwell Financial Group's Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Bankwell Financial Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 0.1% over the next year. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Bankwell Financial Group Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the first annual payment was US$0.20, compared to the most recent full-year payment of US$0.72. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Bankwell Financial Group has been growing its earnings per share at 16% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Bankwell Financial Group's prospects of growing its dividend payments in the future.

Bankwell Financial Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bankwell Financial Group is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Bankwell Financial Group that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.